Typical life insurance policies provide a lump sum benefit upon the death of the insured. Unfortunately, it can be difficult to determine the appropriate amount of insurance benefit a wage earner may need to replace the wage-earner's stream of income. For example, a lump sum death benefit may be in excess of the amount needed if the insured dies close to or after retirement age, and may be less than the amount needed if the insured dies prior to retirement age. Purchasing too large of a policy adds extra and possibly unnecessary premium expense to the insured. Purchasing too small of a policy saves premium expense, but results in beneficiaries with too little replacement income.
Lump sum death benefits also require that the beneficiary properly manage the amount received. Many beneficiaries spend the benefit amount too quickly, leaving them without sufficient income to cover expenses. It would be desirable to remove or substantially reduce these uncertainties and provide beneficiaries with a known stream of income upon death of an insured.
The present inventors have recognized that paycheck replacement policies provide desirable benefits to insured and their beneficiaries and that computerized pricing and issuance of such policies can provide improved benefits to the insured, the beneficiary and the issuer.